$4,000 a month

[Brooks Saddle]

I recently read a blog written by an individual named Darrow Kirkpatrick who retired at 50. His blog is called "Can I Retire Yet?"

He cited a figure that most retired couples live on $4,000 a month on average. He even stated that couples that had incomes in 6 figures prior to retiring only spent $4,500 a month on average. I don't recall where he got these statistics but when I read this I remember thinking the source was credible.

I've not retired yet but I am getting dangerously close. I know what my wife and I spend now but there are things in retirement we want to do that will most likely drive up our spending at least in the early years.

With this said, for those of you in retirement, does the $4,000 spending per month seem plausible?

 

[RockyMtn]

You will find people on this site who spend a lot less that $4k per month and those that spend a lot more than $4k. Depends on a variety of factors....mortgage payment, yes or no. Retiree health care...yes or no. I could go on and on.

 

[Jack_Pine]

I would be interested as well. also agree spending may increase in the first few years (pent up demand).

I am budgeting for twice that, at least. (includes expenses and discretionary)

 

[daylatedollarshort]

I recently read a blog written by an individual named Darrow Kirkpatrick who retired at 50. His blog is called "Can I Retire Yet?"

He cited a figure that most retired couples live on $4,000 a month on average. He even stated that couples that had incomes in 6 figures prior to retiring only spent $4,500 a month on average. I don't recall where he got these statistics but when I read this I remember thinking the source was credible.

I've not retired yet but I am getting dangerously close. I know what my wife and I spend now but there are things in retirement we want to do that will most likely drive up our spending at least in the early years.

With this said, for those of you in retirement, does the $4,000 spending per month seem plausible?

You can check out the Consumer Expenditure Survey by age for averages -

http://www.bls.gov/cex/2011/Standard/age.pdf

The median household income in the U.S. is around ~50K.

 

[Alan]

$4k/month in retirement sounds very plausible to me.

 

[roger r]

As a single person I spend about half of that with home paid off, no other debt, and health insurance from pre-retirement employer. All other things considered, it probably depends on one's lifestyle and there is no real answer. The most common thing I hear is that retirement costs less than they had expected.

 

[farmerEd]

Because I have no mortgage, and modest tastes, wife and I could live very comfortably on that amount of money once the kids are out of college.

 

[NW-Bound]

While it may satisfy our curiosity to know how the others live, every situation is unique. Some spend a lot more, some a lot less, as an earlier poster noted.

Another question is if one's expenses go up or down after retirement. I think that has been asked before, and if I remember correctly, many spend more due to travel or leisure activities, and having to pay for own health insurance.

In our case, we did not pull the plug abruptly as most people. First, I worked part-time, then my wife retired fully, then I stopped my work. We had been traveling a bit even before full retirement, due to having too much free time compared to working couples. We have been buying our own health insurance for a few years.

I cannot remember exactly what we spent when we were both working full-time, but I suspect it was a bit less. However, other than the health insurance, all other increases are discretionary, and one incurs them only as the budget, aka market, permits.

 

[Brooks Saddle]

I realize everyone has a unique situation. I live in an area where the cost of living is a little below the national average. Perhaps you live in NYC or San Francisco. Like many my house is paid off while for others this may not be the case. I drive cars a long time and don't spend a lot on them to begin with while your tastes might be imports from Germany. We don't dine out frequently and then it will be a Mexican restaurant or other less expensive menus while some like white table cloth restaurants. I'm not making judgements but merely agreeing each couple has their own unique situation.

I agree there are a lot of variables. The figures cited of $4,000 and $4,500, however, were averages and I just wondered if others thought they seemed somewhat based in reality.

 

[jollystomper]

For us I do not see it. Our planning is for 8333/month (basically 100K year), in the DC-MD-VA area which is not low cost. This month has been another "practice run" for a retirement living month. Our projected "fixed" expenses alone (mortgage, state/federal taxes, property taxes, health insurance premiums, auto insurance premiums) leave very little room for 4K a month. Now we do still have one child who is 18 so that is a factor in the health/auto premiums cost.

 

[NW-Bound]

No, we do not live in an expensive area, and other than having a 2nd home, a gas-guzzling RV, and the love of travel, have few indulgences. If it weren't for the above, I could live well on $50K/yr (after income tax), and be just as happy. No German cars. Fancy restaurants only once per month if even that. I even maintain my own cars.

Ah, a lot of stuff people do is just fluff. If I have to cut back on the above extraneous stuff, I am sure I will not be at all miserable. What makes one miserable is being sick, I tell you.

 

[RunningBum]

Doing some math, 100K probably comes out to around $70K take home, give or take depending on your state tax rate. Take $54K for expenses out of that, that leaves $16K in savings, including 401K. Sounds a bit high for the average American, but I suppose it's possible for a couple making 100K.

If I had to guess, I'd say that the average is more like $60-66k or 5000-5500 per month, especially if you include the annualized cost of replacing cars and doing major home repairs. A couple who spends $54K/year but replaces 2 cars on average every 5 years taking a hit of $15K per car is really spending $60K.

Not sure what it matters though. I base my own budget on my own real needs and wants. I don't really care if it's typical or not.

 

[FANOFJESUS]

With the average social security around $1300 I think a lot of couples retire on $2600. So 4k would be no problem for most people unless you are in a high cost area. We live on less that half of 4k here in MO.

 

[Refresher]

If the $4000 a month comes from a traditional IRA or 401k it may not even be much for a single person who rents.

Taxes and healthcare can total $1000 a month.
Apartment and utility expenses $1000.
Auto expenses, food, entertainment and everything else?

A $1000000 retirement account may not provide much more than a good lifestyle.

 

[IBWino]

By the time I retire in a few years, we will be debt free, and $4K per month is about the minimum that my wife and I could get by on without making any significant life-style changes (assuming that we can get health insurance for <$1500/month). However, we're planning on $6K/month because we want to be able to dine out at a nice restaurant at least once a week, and take occasional short weekend trips. Additionally, we are planning on supplementing our travel budget by $10K/year for the first ten years, but this is discretionary and could be eliminated if need be.

 

[brett]

Only you know the answer.

It depends on the cost of living in your area, your lifestyle, your fixed costs, and what you plan to do in your retirement.

 

[W2R]

Median household income in New Orleans is $37,325 according to census.gov . Orleans Parish QuickFacts from the US Census Bureau

That median income of $37,325/year ($3110/month) includes working people, too.

Often retirees have finished paying off their homes, so that would lower their expenses in comparison with working people.

Most people, ER Forum members excluded of course, are abysmally ignorant (or hiding their heads in a hole?) with respect to the often tremendous differences in cost of living from place to place within the US.

 

[scrabbler1]

I am living just fine on slightly under $2,000 a month (single, no kids, no debts). I pay for my own HI although that will rise a bit once the ACA goes into effect next year. However, I won't mind that because I will be able to return to a broader coverage like the one I got rid of in 2011 after the premiums rose 50% in 2 years. My investment income is around $3,000 per month so if it were $4,000 a month that would be pure gravy.

 

[Live And Learn]

Until age 65, for two people, I have $2,100 a month budgeted for Heathcare alone. After age 65 I have $1,250 per month budgeted for Healthcare. I could retire on $4k / month if I were 65, but not before that.

 

[Independent]

I realize everyone has a unique situation. I live in an area where the cost of living is a little below the national average. Perhaps you live in NYC or San Francisco. Like many my house is paid off while for others this may not be the case. I drive cars a long time and don't spend a lot on them to begin with while your tastes might be imports from Germany. We don't dine out frequently and then it will be a Mexican restaurant or other less expensive menus while some like white table cloth restaurants. I'm not making judgements but merely agreeing each couple has their own unique situation.

I agree there are a lot of variables. The figures cited of $4,000 and $4,500, however, were averages and I just wondered if others thought they seemed somewhat based in reality.

I think the Consumer Expenditure Survey is a great place to start. daylatedollarshort gave you a link to one. It shows the average household 65-74 has 1.9 people and spends about $45,000 per year.

The nice thing about the table is that it has detailed lines (way too much detail in food, IMO) that let you compare categories where you are high or low and think about whether you would want to change that item.

There are more cross-sections here: Consumer Expenditures Survey (CEX)
scroll down to "Additional CE Data Tables" in green, then scroll down to "Cross-Tabulated Tables". Note they are available in xls format.

Coincidentally, when I retired, I thought we could cover all our expenses on $44,000, including FIT. We found that medical costs were much higher than expected.

 

[rodi]

My inlaws lived on about 30k/year for years. Until my FIL went into a nursing home.
Helps that they had a paid for house, and paid for "share" of a vacation house (co-owned with siblings)... so they had property taxes on two homes, insurance on two homes, etc.

We're budgeting for about 8k/mo for the first 10 years of retirement. That's because we have minor kids that we'll still need to fund 529's for during that 10 years. Hopefully that will give enough $ to fund their college (public university only). We used our current budget - adjusted for no 401k contributions, no mortgage p&i (we're paying it down and will pay it off when we retire), but increased healthcare insurance. Since we live comfortably now. Take a "big" vacation every other year (europe), etc, we consider that a good starting point for a budget.

 

[rothlev]

Darrow is writing about upper income retirees with a paid off home, and subsidized health insurance. Given those parameters I wonder if his numbers were true for most upper income retirees.
How Much Will it Cost You to Live in Retirement? - Can I Retire Yet?

 

[rodi]

Until age 65, for two people, I have $2,100 a month budgeted for Heathcare alone. After age 65 I have $1,250 per month budgeted for Healthcare. I could retire on $4k / month if I were 65, but not before that.

Have you gotten quotes?

I've received quotes for continuing my current coverage - family of 4, husband in his 60's (so expensive)... It's less than $1200/month. But this is an HMO... not a cadilac plan.

 

[jon-nyc]

Our property taxes would eat up more than half of that. Health care would probably eat up most of the rest. Not sure how we'd eat or heat the house.


In a low cost of living area I'm sure its doable, as long as you have inexpensive health care.

 

[Koolau]

As some have alluded to: HC insurance (and co-pays, etc.) are the key to whether you can retire on a given monthly income. I'm guessing that most of us could adapt to a figure of $2500/mo if we had to - as long as HC was covered outside that figure. Just a generalization, of course.

BUT, in our case, we spend more like three times that ($8k/month) but that does include HC premiums, etc. To downsize to $4K, we would have to 1) move 2) travel less 3) Rarely eat out 4) curtail charitable and "kid" giving. None of those things are we willing to do (unless our fortunes turn around or if the ACA makes my old Megacorp do away with it's highly subsidized retiree HC insurance - which seems very possible.)


Within limits, one can adapt to very low income levels and still lead a life better than 90+% of the world. As income goes down, "programs" (e.g., food stamps) open up and taxes disappear (or become "credits"). So, toward the lower end of typical living standards, your money goes a lot further. At $4k/mo, you are likely not able to avail yourself of programs, but your taxes should be minimal if you pick your state wisely.

As in everything, YMMV.